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Game Changes: Sony’s New Terms of Service

Last Thursday, Sony quietly added a binding arbitration and class action waiver section to its Playstation Network terms of service agreement. The result: users now agree to proceed individually in any dispute against Sony, foreclosing the option to participate in new class action suits. The terms also give Sony the option to handle any dispute through arbitration, the results of which are binding and final. These changes come in the wake of several class action suits filed against Sony, including a lawsuit over the massive security breach that happened earlier this year.

When probed for the reasoning behind the change, Sony responded that the updated terms were “designed to benefit both the consumer and the company by ensuring that there is adequate time and procedures to resolve disputes.” The gaming community seems unconvinced. “Seems to me Sony is spontaneously forcing users to renegotiate their use contract in a decidedly one-sided fashion,” wrote one Slashdot contributor. “With this new clause, Sony can make a quick buck off its customers without having to worry about ramifications,” another poster lamented.

But is this really the case? Law and economics principles teach that arbitration clauses can actually be efficient for consumers: if given the choice between arbitrating or filing suit over a defective product (say, for example, an iPod), most consumers would choose arbitration. Individual suits are expensive and take a long time; most consumers would rather recover quickly through an inexpensive procedure and move on. Consumers may also prefer products with binding arbitration clauses because they cost less, as manufacturers often build litigation risk into their pricing.

However, it’s unclear whether these principles apply to Sony’s Playstation Network. Rather than an off-the-shelf consumer product, the Playstation Network is a complex service with a wide range of potential consumer grievances. Some, such as small service interruptions, could be worth very little to a consumer, while others, such as a massive leakage of sensitive financial data, could be worth a lot. In these latter cases, consumers might be less willing to settle for an arbitration proceeding and would want the option to sue. Moreover, because potential grievances are more diverse, it would be harder to design “efficient, streamlined [arbitration] procedures tailored to the type of dispute,” a key advantage of arbitration noted by the Supreme Court in AT&T Mobility v. Concepcion. Given this, Sony’s new agreement may be more one-sided than its comments let on.

So what if consumers don’t think arbitration is the right answer to potential Playstation Network woes? Sony allows users to opt out of the waiver by submitting a written request within 30 days. Numerous gaming blogs have posted alerts with detailed instructions for opting out, but it remains to be seen how many people will notice the alerts or care to respond.